Attorney General Abbott Files New Action Against Four Drug Companies For Inflating Drug Prices

Attorney General Abbott Files New Action Against Four Drug Companies For Inflating Drug Prices

Drug-pricing scheme exploited Medicaid program, enriched participants

AUSTIN - Texas Attorney General Greg Abbott today charged several generic drug manufacturers with reporting false, inflated drug prices to the Texas Medicaid program.

Today's enforcement action names the following defendants: Watson/Schein Pharmaceuticals Inc. of California; Alpharma Inc. of New Jersey; Par Pharmaceutical Inc. of New Jersey; and Barr Pharmaceuticals Inc. of New York.

Media links
Texas Attorney General's lawsuit against Alpharma Inc., Barr Pharmaceuticals Inc., et al.

Under state and federal law, drug manufacturers must inform the Medicaid program about their products' sales prices. This reporting requirement includes pricing schemes the manufacturers offer to a variety of providers, including pharmacies, wholesalers and distributors. The Texas Medicaid program uses this pricing information to estimate the amount Medicaid pharmacy providers pay to acquire the drug manufacturers' products. Pharmacies bill the state-run, taxpayer-funded program for these costs, plus prescription dispensing fees, and Medicaid reimburses them based on the manufacturer-reported pricing information.

Because of the manufacturers' falsely reported prices, Medicaid reimbursed pharmacies at vastly inflated rates. The resulting windfall profits, which date back to the early 1990s, unlawfully induced pharmacies and other providers to purchase the defendants' products.

Today's enforcement action began with a sealed whistleblower lawsuit that was filed by home-infusion pharmacy Ven-a-Care of the Florida Keys Inc. Acting on similar information from Ven-a-Care, the Attorney General has taken action against numerous defendants for launching similar drug-pricing schemes. Among these are Schering-Plough/Warrick Pharmaceuticals in May 2004 ($27 million); Dey Inc. in June 2003 ($18.5 million); Boehringer Ingelheim/Roxane Laboratories in November 2005 ($10 million); and Baxter Healthcare Corp. in June 2006 ($8.5 million).

The Attorney General's legal actions against B Braun Medical Inc. of Pennsylvania and Abbott Laboratories Inc. of Illinois remain pending.

The Attorney General's enforcement action reflects a continuing crackdown on waste, fraud and abuse in the Medicaid system. In 2006 alone, the Texas Medicaid program cost more than $17 billion. To save taxpayer dollars, Attorney General Abbott has dramatically expanded both the Civil Medicaid Fraud Section and the Medicaid Fraud Control Unit. Since Attorney General Abbott took office, the civil and criminal Medicaid fraud sections have recovered more than $200 million.

With the passage of amendments to the Texas Medicaid Fraud Prevention Act in 1997, the Texas Legislature paved the way for whistleblower lawsuits involving industry insiders, such as Ven-a-Care. Under the law, whistleblowers may be eligible for a percentage of damages recovered.

To obtain more information about the Attorney General's efforts to fight Medicaid fraud, access the agency's Web site at